Most public and private defined benefit pension plan sponsors aim to design an effective liability driven investment (LDI) strategy that balances several objectives – achieving the desired funded status for the plan, managing return-seeking assets in the portfolio against relevant benchmarks, and effectively de-risking and hedging future liabilities. LDI portfolios traditionally rely on a combination of Treasury securities and long and medium duration corporate bonds as hedging instruments.

The outbreak of COVID-19 has quickly translated into a severe shock for the global economy and real estate markets. Near-term indicators of performance have turned sharply downward, and the situation is fast-moving.

Data from the economic shock caused by the COVID-19 pandemic is beginning to form a picture, and it’s an ugly one. Growth across the U.S. and Eurozone contracted more than expected in the first quarter of 2020 with the expectation that the very worst of the data will be revealed in the second quarter. Batten down the hatches for a set of what is most likely to be historically bad data in the coming months.

In my last blog, I discussed how the covid-19 crisis would accelerate trends already underway in the property industry, namely digitisation, remote working and sustainability. As we begin to see what life after lockdown may look like, one thing for certain is that developers, landlords and occupiers together will be faced with unique opportunities to help make these changes lead to a fairer, greener and more resilient world.

Limited current and future supply levels will limit the decline in prime office rents in the short term. But the economic challenges are likely to lead to headcount reductions, with corporates vacating unutilized space. This trend could be accelerated, if as we expect, corporates adopt higher levels of flexible working in a post COVID-19 world.

COVID-19 is shaping up to be one of those defining moments that changes the behaviour of future generations. While it’s too early to predict whether we’ll be referring specifically to the “COVID-19 Generation” in the future, the fall out and ramifications for how we live and work are tangible across all demographic groups.

The COVID-19 crisis has generated significant uncertainty in relation to the economic outlook. As in other countries around the world, Australian economic growth is expected to slow with Deloitte forecasting a - 5.2% contraction in GDP growth in 2020. However, the unprecedented nature of this event makes it hard to accurately predict the depth of the downturn and the timing of recovery.

The failure to contain the Covid-19 pandemic has resulted into more than 80 countries to be in some form of lockdown at the time of writing. The draconian constraints on movement enacted by governments remain the most realistic option to support the fragile global healthcare system.

Although history offers no magical answers, it can serve as a useful guide in times of extreme uncertainty. Vivienne Bolla and Souad Cherfouh dig into the archives to better understand the effects of recessions on real estate.